Property Investing in The 21st Century

Renovating a Property For Profit

In today’s post we will begin to look at renovating an investment property in order to make a profit, or to get some instant equity in the property. In my eyes, instant equity is profit as well.

Renovating real estate is not for everyone, as it can be a stressful and consuming time for all involved. If you get it wrong, it can also effect your bottom line dramatically. Many people who are new to property investing  may decide to renovate in order to get a foot in the market. Other investors really like the challenge and the work and use renovating as their primary investment vehicle.

Before you purchase a property with the intention of renovating it, you must first decide how much of the work you will be doing, if any. Some choose to complete the entire renovation themselves, some choose to use contractors for everything, and of course there is everything else in between as well. Doing the work yourself will save you money, if you know what you’re doing. It may not save you time though, as specialised contractors can be in and out rather quickly.

Once you have worked out your method of renovation, you must of course work out a properly planned budget for the work to be done. Always use conservative figures, and add an extra 10% for unplanned expenses. Something always seems to come up when you least expect it. If you get your budget wrong, then you will end up making a loss on the project, and we do not want that.

When you are looking for properties that you are considering renovating, it is an absolute must that you get a genuine builders structural inspection completed. It is best that you do not touch any properties that have any structural damage at all. Go for real estate that has cosmetic damage, and can be easily fixed, and fixed for a low price.

When deciding your capital expenditure for the renovation, be careful not to over capitalise, and only allocate the bulk of the finance to certain areas. Areas such as the bathrooms and kitchen should always come first when it comes to renovating. Spending money on things that simply do not need them will greatly effect your profit margins.

Renovating real estate can be a very rewarding investment if that is the path you choose to go down, although in your first project, there will be lots of testing moments and a lot of lessons to be learnt. It is still one of the best ways to quickly add a lot of instant equity to your investment property.

Written by Clint Maher - 21st Century Academy
Complete Wealth Education P/L © 2008